Controversial landlord Steve Croman has sold four stepped homes in Hell's Kitchen in a rare deal that has allowed him to escape the scrutiny of troublesome neighbors and net him a handsome sum.
The landlord, known for his past harassment of tenants and long-term holdover tactics, picked up 351-357 West 45th Street for $20 million, according to Cushman & Wakefield. The most recent mortgage was taken out in 2020 for $18.5 million, which Croman likely paid off with seven figures to spare.
Unfortunately, Croman bought the property in 2013 for $23 million, six years before the city of Albany began devaluing rent-stabilized properties. In a phone interview, Croman said the property contains 80 units in total, 95 percent of which are rent-stabilized.
“It was a lateral transaction,” he said of the June sale.
But that's a shocking figure compared with recent rent-stabilized sales: Croman fetched $504 per square foot, or $250,000 per unit, according to Cushman & Wakefield.
Manhattan buildings with a similar percentage of rent-stabilized units sold for an average of $215 per square foot and $115,255 per unit in the first quarter, according to a report by Ariel Property Advisors.
The buyer of Croman is a nonprofit called Services for the Underserved, which will take advantage of the building's largely vacant status to “flip” the rent-stabilized units into affordable housing with higher rents.
While vacant properties have increased the value of the portfolio by providing an escape route for regulations, they've also created other problems. Last October, the HK45/46 Street Block Association called on city agencies to address the “drug dealing, drug use, and filth and deterioration occurring at 353 West 45th Street,” association president David Stewart said in an email reported by W42ST.
“When you have a lot of empty seats it makes it difficult,” Croman said. Genuine“Drug dealers were coming in and there were squatters.”
“It was a headache,” he said.
According to W42ST, Stuart's letter calls for “immediate, substantive and effective action” and has caught the attention of elected officials and other agencies, including the Department of Buildings.
Croman has indeed made some changes: Tenants said in January that he was truthful in telling W4ST that the landlord had hired a new caretaker, installed a gate, replaced the roof door and added an alarm system, locks and lighting.
The landlord's lawsuit may have been the catalyst: Croman didn't regain control of the portfolio until January 2023, nearly five years after the attorney general settled a lawsuit that alleged he misled tenants of rent-stabilized apartments into vacating them. The agreement temporarily removed the buildings from his control.
Despite Croman's progress on the property, state Assemblyman Tony Simone told W42ST in January that Croman “should be removed from ownership of the building immediately.”
Six months later, his wish was granted and Croman was headache-free.
SMJ Development and High Point Property Group, a service and development partner for the underserved, plan to maintain units for the 11 rent-stabilized tenants still living in the building and plan extensive renovations to house homeless families with CityFHEPS vouchers in the remaining apartments.
Taking a unit out of rent stabilization allows the full amount of the voucher to be paid in rent. For example, a tenant using a CityFHEPs voucher for a one-bedroom rental could pay up to $2,696 in rent per month. Some rent-stabilized units can be less than $1,000.
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Croman could have renovated the properties himself to bring rents up to market rate, which was his primary strategy in the past, but state law allows owners to do so if they substantially renovate a property — meaning they renovate at least 75 percent of a building in bad condition.
But Croman said because the properties are in a special-use district, there will be restrictions on making changes to the layout of the apartments.
“You spend all this money fixing it up and it's not going to be a well-designed project,” he said. “You're left with something like a toilet in the hallway, and we didn't want that.”
The Department of Low Income Services plans to borrow $45 million to fund the construction, including $27 million from the city's Department of Housing and Urban Development and the rest from private lenders.
